USD/CNY: Probing the downside - MUFG
|Derek Halpenny, European Head of GMR at MUFG, suggests that with hindsight we should have left ourselves a little more wiggle room in last week's range as far as USD/CNY pair is concerned.
Key Quotes
“Authorities push below our prior lower bound and are, we believe, still probing the downside. This still looks to us like another CNH rates squeeze to support the currency. Onshore there was novel talk authorities may let interest rates rise to defend CNY but given the debt overhang we still think any longer term rise will be mild.”
“Our previous rule of thumb - that anything bigger than a USD50bn monthly reserve loss is not okay with Chinese authorities - seem borne out after November's USD69bn loss led almost immediately to tightening of capital controls. We still think the apparent November export improvement belies structural changes underway in the global supply chain.”
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